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Based on moral hazard, this paper introduces corporate cash holding into the dynamic stochastic general equilibrium (DSGE) model to explain the insufficient investment and monetary policy ineffectiveness, and further discuss the optimal countercyclical policy. Different from external financing...
Persistent link: https://www.econbiz.de/10013492190
–“natural rate theory”- dominated interpretations of economic trends and policy prescriptions since the 1970s. Public policy …. Economic trends were filtered through the lens of the “natural rate theory,” focusing on labor market institutions only and … allow markets to operate more freely, i.e. to bring the real world closer to the idealized theoretical model. This paper …
Persistent link: https://www.econbiz.de/10008651698
This paper analyses the potential roles of bank asset fire sales and recourse to central bank credit to ensure banks' funding liquidity and solvency. Both asset liquidity and central bank haircuts are modelled as power functions within the unit interval. Funding stability is captured as...
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We propose a novel theory of banks' liquidity management and financial fragility. Banks hold liquidity and an illiquid …
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